THE BLOG

26
Aug

There’s PANIC in the streets

 ONLINE payday lenders are running scared.  If you’re in a Storefront, and you don’t closely follow the news, you probably missed all the excitement.
On July 22, the FTC issued a ruling that even Indian Tribes are subject to FTC regulations on Payday Loans.
On August 12, New York Attorney General Eric Schneiderman sued an ONLINE lender for making Internet Loans to the people in the State of New York.
The BIGGEST impact was from a statement on AUG 9th that regulators and BANKS will cut off ACH access to Payday Lenders.  This is absolutely huge.
The ACH systems (direct deposit/ debit) allows many different industries to have AUTHORIZED access to peoples accounts.  This is actually a very nice system.  It’s fast.  If you make a deposit before 8:00pm, it will appear into the customers’ account the very next morning.  It’s almost as fast taking payments.  Usually  you have confirmation of payment within a few days.  They’re calling for a ban on ACH use by a specific industry (US!).
ACH transfers work well, have excellent reporting, and there is a low transaction cost.  RETURNED items cost very little.  Ten cents per transaction, maybe $0.75 for a bounce.
Few of the smaller storefronts use much ACH.  Mostly it’s used as a collections tool.
But if you’re ONLINE, this is massive.  The regulators are cutting you off at the knees.  There is no comparable service available that can do the same things.  Many operators are simply shutting down until they see what happens.  LEAD cost is PLUMETTING.
These lenders are calling me, and my consulting team.  “What do we do?”
First?  Relax.  Payment vendors are scrambling, and there are already a handful of viable options.  Large lenders, and especially the TRIBES are taking this on directly through the court systems.
The point of this article isn’t to address this specific crisis.
We are in an unpopular industry.  We are ALWAYS under attack from lawyers, consumer action groups, banks, politicians, and of course deadbeat customers.
We’re always under attack, and you should always be prepared.
 I worked with a smaller online operator.  My first day there, I STRONGLY recommended they open a second ACH account.  Just in case.  ACH vendors have rules and compliance issues.  If they get a bad audit, or one of their clients violated a rule, then they will close any high risk accounts.  That’s what happened to this group.  It was a newer operation, and they had a lot of returns.  With NO warning, their ACH was cut off.  As the management team scampered to establish a new vendor relationship, the portfolio went STALE.  It took 29 days to get going again.
An ACH account costs a few hundred dollars to setup and if not used much?  Maybe $80 per month.  To save this money, this group lost HUNDREDS of thousands of dollars.  PLUS, the customer relationships were corrupted.
KEY POINT:   You should have multiple product lines.  You should have multiple bank accounts.  Multiple ACH accounts.  You should have DOZENS of websites.   If you’re bigger, have operations in multiple States.
Let’s do a case study:
Western Sky is an online Payday Loan operator.   He just fired 150 employees and is closing shop.   What went wrong?
1:  He’s a MEMBER of a tribe.   A properly organized lending operation is actually owned by a TRIBAL entity.  Just being in the Tribe doesn’t give you the same protection.
2:  The operation was TOO visible.  He created a brand name with T.V. commercials.  Good for marketing, but you’re creating an easy target for yourself.
3:  He picked a fight with State Attorney Generals.  Remember, they’re fighting you with unlimited resources AND they have the “public” on their side.
When we work on crafting a new venture, or when our team goes into an ongoing operation, we always ask “what if?”
What if the State changes the Law?
What if your ACH provider drops you?
What if your bank drops you?
What if there is a major lawsuit?
What if your primary product goes away tomorrow?
What if your collections department is violating the law?
What if you have some Consumer agency after you?
What are your plans?  Can your business adapt?
Miro Posavec
16
Aug

As a BOSS, do you want to hire TALENT, or dumb and steady?

My friend Maria is a Marine Biologist.  Her profession and experience is very different from mine.

Maria is also an employer, and has almost two decades in managing smart and nerdy people.

 

So, my question to her was this:  Do you seek out the regular, steady employee.  The employee that follows directions, shows up everyday, gets along with others, and causes no drama.

OR?

DO you seek out GENIUS?  Do you want the brilliant mind working for you?  Are you willing to manage and put up with the EGO, randomness and the DRAMA that comes with a creative, and powerful thinker?

I assumed that in the world of science, you wanted people to follow direction.  I assumed that compliance and control was MORE important than having some MacGyver type going off in their own path.

I was surprised by Maria’s response:  “No question, I’ll take the egomaniac smart person, over the plodder.   Even though there will be days where the STAR is having a mood, or a pout.  Over the course of time, that creative problem solving, the ability to see through the mess has tremendous value.”

“I’m willing to do the extra work to babysit them, and try to keep them focused, but you’ll get a lot more done with this person in a week, than a plodder will accomplish in a year.”

 

We mostly hire “entry-level” people, with entry-level pay.  AFTER some terrible experiences, most of us become so frustrated that we’re willing to accept an employee that shows up on time, and mostly SOBER.

I’m going to ask you to stop doing that.   Don’t settle for Mediocre.   Look for the STAR.

Who is a star?

 

You want a person that is friendly, outgoing, and has a way with people.  The operations and procedures – all that crap you can teach.  But CHARISMA is rare.

 

Let me tell you WHY you want a STAR:

 

I’ve been lucky and have had a few stars in my operations at any one time.  Pay close attention to this:  We had opened up a new location about 50 miles from any of our other stores.  We transferred a manager from another location.  Blah.  The numbers were terrible.  The location had a BUSY street and great signage but after six months, it wasn’t even at break-even.  We tried a few other managers but never got above $5,500 per month in revenue.  I wasn’t willing to close the location, because I KNEW it was a great spot.  We were missing something.

 

I got to know a guy named LARRY that was running a little family cafe.  LARRY had just closed down his business and needed work.  (Regardless of my comments about hiring men, I’ve had a few great ones).  I liked the guy a lot and hired him.  Larry was in a tough spot financially and needed to work ALL the hours he could get.  I put him into the stagnant store.  Open to close, six days per week.

 

Result?

 

Within three months, the location had doubled to $10,000 per month.  At the end of Larry’s first year, the store was doing $27,000 per month in revenue.  Steady.  That’s a $21,500 MONTHLY difference.

 

Here’s the thing:  Larry wasn’t that smart.  He wasn’t great with collections.  I had to send somebody up there once a week for half a day to clean up the paper, and I’m pretty sure that he was skimming a few hundred per week from NSF charges/late fees.

 

But, Larry was a charming guy with the ladies.  When any woman walked in, 18 or 88, he would greet them enthusiastically with a “Hello BEAUTIFUL lady!”   With a disarming smile and a slight accent he pulled it off perfectly every time.  Even the most jaded, angry and bitter woman was putty in his hands.

Larry spoke four languages.

Larry would connect with the guys as he was a car and motorcycle enthusiast.  As Larry drove a 1950’s truck to work everyday, it was an instant ice-breaker.  There was never any attitude back or forth.   Larry was their buddy.  Their friend.

Most employees develop favorite clients, but they tend to treat the new clients like crap.  He didn’t do that. Everybody loved him.  He could find common ground with anybody.  Larry made each person feel special.

Hiring the **STAR** made a $258,000 difference on my bottom line.  Per year.  He stayed with us for three years and after he left, the numbers went down about 20%.

 

In total, hiring him made me $850,000 in additional revenue over his tenure.  Not counting the residual clients that stayed on after he left.  I think that justifies the extra time and effort I took getting to know him a little before I hired him.

 

He eventually left for a better paying job and moved out of State.  We paid him pretty well.  Going back in time, reviewing the numbers as I did for this example, I should have doubled his pay, created a FAT bonus structure, and chained him to the store forever.

Maria was right.  Look for the STARS.  Allow them to work to their strengths.  Find ways to prop up their weaknesses.

Our industry isn’t about money, it’s about PEOPLE.  The first, and most important hiring decision you make on your front line is people skills.  Charm.  Charisma.

 

Don’t settle.  Be GREAT out there!

 

Miro Posavec

 

PS:  If you want to know our secrets to finding and KEEPING stars, you should check out our Powerhouse operations course.   Click HERE to buy.

14
Aug

I got angry phone calls because of this post about FUNDING your business

Every time we share tips, or resources we have a simple criteria for doing it.

“Will this information HELP the operator?  Will our efforts be positive and create a positive change or difference in their operation?”

If you are in the payday/loan business, want to get into this business, or are trying to GROW (we should all be trying to grow).  Then you need $$$.  Our industry is all about the cash.  And getting funding has always been a big challenge.

Back in early June, I was having coffee with my old friend Ray Sims (Capital Solutions Funding Group).  Ray was telling me about this funding program that he’d developed.  I’ve known Ray for years, and  I had trouble believing that this type of lending was now available.    But Ray is a straight shooter.  I had to trust him and I wrote it all up and shared it will all of you.

On June 24, 2013 I had posted a write up about a new bank-based funding program for new and existing business.

And the crowd went WILD!

My phone rang off the hook.  People were accusing me of running a SCAM, and that this type of funding didn’t exist.  And to be honest, it didn’t exist 3 months ago.  This program is entirely new, and innovative.

Most people were VERY skeptical.

Ok, they were more than skeptical.  They were HOSTILE.

A few brave souls actually filled out the form, and got the process started.

The video is an interview with Jerry Evans.  Jerry was the very first person from our site to apply and get funding.   Jerry is a gentleman that has 12 years in the Payday loan industry.  He’s worked with the big guys and has ventured on his own.  Here’s the interview and he tells his story of what it was like to work with the group.

 

Opportunity:

Up to $200k on new business (per well qualified signor)

Up to $350k on established business (per well qualified signor)

 

Structure:

The funding is a combination of loans, lines of credit, and sometimes even credit cards.  These are established with real banks and credit unions.

 

Application fee:  $0.00

 

Interest rates:

Depending on the individual credit strength and the structure of the deal.  In same cases, there is a loan at regular interest rates, lines of credit are usually prime +2-3, and the credit cards are often no interest no payment for the first year.

 

Fees:

There is a 12% fee to establish these lending facilities.  This is paid out from loan proceeds at closing.

 

How to apply?

Step 1:  Go to www.creditKarma.com and pull your own credit.  If you score over 680, then you qualify for this program.  When you create this account you will get a CLIENT CREDIT ACCESS USER and CLIENT CREDIT ACCESS PASSWORD.   The user is usually your email address and the password is something you choose.  Write these down, as you’ll need them to apply.  This is a SOFT credit pull.  This does not affect your credit, and when the banks look at your file using this information, they’re not pulling a credit report either.

Step 2:  Fill in the form below.  If you included your client username and client password for Creditkarma, you will get an approval letter in 2-3 days.  If you wish to talk to somebody first?  No problem.  Just complete the contact information, and you will be contacted.  But understand that the soft pull information will be required to move forward.  ***you are not committed to anything, and you’re not being charged anything at this step.  Capital Solutions funding is exploring HOW they can help you meet your goals.

Step 3:  You will be sent a pre-approval letter with an application form.  At this point you have a pretty good idea of what’s available to you, you’ll see all the rates, and how the funding is setup.  If you want to move forward, you complete the forms and send them in.

Step 4:  Final signatures and funding.  You’re presented with the funding plan.  At this point you can walk away and you’ve spent $0.00.  If you like the program, then you sign the papers, and your funding becomes available to you.  The 12% fee is taken at this time.

 

Here is the special LINK that takes you to an application page.  This page allows the company to KNOW that you are coming from Payday University and that you should be well treated.

LINK to application

 

 

 

 

03
Aug

Vittana-Micro-Lender

“Technology to change the world one student at a time,”  crowd funding micro-lender Vittana CEO Robin Wolaner. Small loans to students: $750 avg. size loan triples their income after matriculation. Interestingly, Ms. Wolaner stated, “Traditional micro finance loans are focused on women because men do not tend to pay their loans back.” However, Vittana serves a roughly 50%/50% mix of male to female loan recipients with a 99% payback average.

Muhammad Yunus, famous for launching the micro lending movement via Grameen Bank and winning the Nobel Peace prize, made the same statements about males failing to payback their loans.